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Wed Jul 30 04:59:50 SAST 2014

Zimbabwe central bank cautions on foreign bank ownership

Reuters | 31 January, 2013 18:55
Reserve Bank Of Zimbabwe Governer Gideon Gono. File photo.
Image by: Africa Edition

Zimbabwe's central bank chief on Thursday cautioned the government against a drive forcing foreign banks to hand over majority stakes to locals, saying this could damage confidence in the sector battling through a fragile economic recovery.

Gideon Gono also said the current dollar crunch and high interest rates, which averaged 22 percent in 2012, were a result of political risk and urged leaders to tone down rhetoric that could scare away foreign investment.

Zimbabwe was on a "path to destruction" with a huge import bill of $7.5 billion last year against exports of $3.9 billion, Gono added.

"The financial sector is a different animal altogether, a one-size-fits-all approach does not work for the sector," Gono said in a monetary policy presentation.

He added there was a need to "restore confidence, trust and stability in the sector."

Foreign firms, already cautious about doing business in the resource-rich but destitute state, were increasingly skittish about entrenched President Robert Mugabe's calls forcing them to turn over majority stakes to locals.

Mining firms have faced the most pressure but banks have increasingly become targets.

Standard Chartered Bank Plc, Barclays Bank Plc , South Africa's Standard Bank and Nebank all have operations in Zimbabwe.

The southern African country is set to hold a referendum on a new constitution by April and general elections later this year. It has approached foreign donors to help finance an election it says it cannot afford.

The country's economy has stabilised since the formation in 2009 of a unity government between Mugabe and rival, Prime Minister Morgan Tsvangirai, but growth is slowing as the country struggles to attract badly needed foreign cash.

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Wed Jul 30 04:59:50 SAST 2014 ::